Correlation Between Village Bank and Webster Financial
Can any of the company-specific risk be diversified away by investing in both Village Bank and Webster Financial at the same time? Although using a correlation coefficient on its own may not help to predict future stock returns, this module helps to understand the diversifiable risk of combining Village Bank and Webster Financial into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Village Bank and and Webster Financial, you can compare the effects of market volatilities on Village Bank and Webster Financial and check how they will diversify away market risk if combined in the same portfolio for a given time horizon. You can also utilize pair trading strategies of matching a long position in Village Bank with a short position of Webster Financial. Check out your portfolio center. Please also check ongoing floating volatility patterns of Village Bank and Webster Financial.
Diversification Opportunities for Village Bank and Webster Financial
0.63 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Village and Webster is 0.63. Overlapping area represents the amount of risk that can be diversified away by holding Village Bank and and Webster Financial in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Webster Financial and Village Bank is a relative statistical measure of the degree to which these equity instruments tend to move together. The correlation coefficient measures the extent to which returns on Village Bank and are associated (or correlated) with Webster Financial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Webster Financial has no effect on the direction of Village Bank i.e., Village Bank and Webster Financial go up and down completely randomly.
Pair Corralation between Village Bank and Webster Financial
Given the investment horizon of 90 days Village Bank is expected to generate 9.1 times less return on investment than Webster Financial. But when comparing it to its historical volatility, Village Bank and is 8.67 times less risky than Webster Financial. It trades about 0.23 of its potential returns per unit of risk. Webster Financial is currently generating about 0.24 of returns per unit of risk over similar time horizon. If you would invest 5,072 in Webster Financial on September 2, 2024 and sell it today you would earn a total of 1,106 from holding Webster Financial or generate 21.81% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 57.14% |
| Values | Daily Returns |
Village Bank and vs. Webster Financial
Performance |
| Timeline |
| Village Bank |
Risk-Adjusted Performance
0 of 100
Weak | Strong |
OK
| Webster Financial |
Village Bank and Webster Financial Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Village Bank and Webster Financial
The main advantage of trading using opposite Village Bank and Webster Financial positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Village Bank position performs unexpectedly, Webster Financial can make up some of the losses. Pair trading also minimizes risk from directional movements in the market. For example, if an entire industry or sector drops because of unexpected headlines, the short position in Webster Financial will offset losses from the drop in Webster Financial's long position.| Village Bank vs. Prime Meridian Holding | Village Bank vs. William Penn Bancorp | Village Bank vs. Pathfinder Bancorp | Village Bank vs. Magyar Bancorp |
| Webster Financial vs. Affinity Bancshares | Webster Financial vs. Auburn National Bancorporation | Webster Financial vs. First Community | Webster Financial vs. LINKBANCORP |
Check out your portfolio center.Note that this page's information should be used as a complementary analysis to find the right mix of equity instruments to add to your existing portfolios or create a brand new portfolio. You can also try the Positions Ratings module to determine portfolio positions ratings based on digital equity recommendations. Macroaxis instant position ratings are based on combination of fundamental analysis and risk-adjusted market performance.
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